GM Plans 10-Weeks of Pickup Downtime as Inventories Rise

By Tim Higgins -
Feb 2, 2013

General Motors Co. (GM), which saw pickup
inventories rise 24 percent last month, will take out 10 weeks
of truck production as it prepares to introduce a redesigned
Chevrolet Silverado and GMC Sierra in the second quarter.

After finishing 2012 with a pickup inventory almost in line
with targets, GM yesterday reported that the number of trucks it
has on hand rose to a 117-day supply at the end of January from
80 a month earlier. The 10 down weeks are a total for GM’s three
pickup plants to allow for the changeover, Jim Cain, a company
spokesman, said yesterday in a telephone interview.

High inventory levels have tested Detroit-based GM’s
resolve not to revert to expensive old habits of heavily
discounting vehicles to boost sales, which can hurt brand and
resale values. The company has to balance having enough of the
older version of the trucks to sell to customers while not
having so many that it hurts the rollout of the new product.

“We feel very good about where we are, going into an
improving industry, a segment that has opportunity,” Kurt McNeil, GM vice president of U.S. sales operations, said
yesterday during a conference call.

The automaker had a full-size pickup inventory of 234,342
at the end of last month, according to a statement. That’s
45,774 more trucks than a year earlier and up 5.7 percent from
221,649 at the end of December. The company’s 2012 target was to
end the year with 200,000 to 220,000 pickups in inventory,
giving it 80 to 85 days’ supply on a selling-day adjusted basis.

The inventory increase came as Silverado sales last month
rose 32 percent to 35,445 and Sierra deliveries increased
35 percent to 12,846 from a year earlier, GM said.

Stock-Moving Event

The company’s monthly pickup inventory report “has become
a stock-moving event for GM,” Rod Lache, an analyst with
Deutsche Bank who recommends buying the shares, said in a
Jan. 31 note to investors. He expected the inventory to increase
by fewer than 5,000 vehicles.

GM’s total U.S. sales in January climbed 16 percent,
exceeding the 13 percent average of 11 analysts’ estimates. GM
rose 0.3 percent to $28.17 at the close yesterday in New York.

The automaker also announced yesterday that it would offer
free standard maintenance for two years or 24,000 miles on 2013
Sierra 1500 pickups purchased in February.

As GM transitions into building the new versions of the
truck, it plans some production downtime, Alan Batey, vice
president of sales, said on the conference call.

Inventory during that period “will be a little bit
lumpy,” he said. “Sometimes it’ll go up a little bit and
sometimes it goes down a little bit but frankly things are
playing out exactly as we expected them to.”